How To Maximise Your Insurance Income Tax Reliefs (Before The End Of 2023)
If there is one part of filing income tax that you can actually enjoy, its claiming your tax reliefs and tax rebates.
Tax rebates are fixed amounts you can deduct based on your total chargeable income while tax reliefs are claimed individually if it falls under the expenses that are allowed for tax claims.
But for both types of claims, remember to have supporting documents that can support your claiming these rebates and reliefs approved by the Inland Revenue Board of Malaysia (LHDN).
One of the best ways to claim income tax relief is to make sure you qualify for insurance reliefs. Because insurance is one expense that you will likely have spent a portion of your income on in any given year, so why not make the most of it?
But, it’s not as simple as it seems, as it’s divided into different categories of insurance and lumped together with the Employees Provident Fund (EPF) tax relief.
So here’s how it works, and how you can make sure you maximise your insurance tax reliefs before the end of this year. It may take some time to apply and get approved for insurance coverage, so best to start early. Don’t wait until near the year end to apply!
What tax reliefs can you claim for insurance premiums?
Here are the insurance-related tax reliefs you can claim for:
| Tax relief category | Limit |
|---|---|
Life insurance and EPF INCLUDING not through salary deduction
| RM7,000 |
| Education and medical insurance (INCLUDING not through salary deduction) | RM3,000 |
| Deferred Annuity and Private Retirement Scheme (PRS) - with effect from year assessment 2012 until year assessment 2025 | RM3,000 |
What insurance policies are eligible for tax relief?
You can claim for your life, education and medical insurance, as well as deferred annuities. Here are the types of policies that are eligible, and how much of your premiums you can claim for tax relief.
| Conditions | How much is eligible for tax relief? | |
|---|---|---|
| Life insurance | Must be contracted by you on your life, or the life of your spouse; or both. | 100% |
| Education insurance | Must be contracted by yourself for you, your spouse or your child. The beneficiary should be your child. | 100% |
| Medical insurance | The policy coverage should be for a period of 12 months or more. Includes group medical policies if you are paying the premium. | Stand-alone policy or as a rider to a life insurance policy: 100% of premiums/rider premiums If a serious disease (i.e. critical illness) cover is attached to a basic policy: 100% of rider premiums If a serious disease (i.e. critical illness) cover is packaged together with a term life/personal accident cover: 60% of premiums |
| Deferred annuity | - | 100% |
More details and conditions can be found in the Inland Revenue Board of Malaysia’s (LHDN) Public Ruling, Taxation of a Resident Individual Part I – Gifts or Contributions and Allowable Deductions.
Filing your tax reliefs with your annual insurance statement
When it comes to filing your reliefs, it’s handy to refer to your insurance annual statement. Your statement may break down the premiums you have paid under each tax relief category.
Here’s an example of an annual insurance statement by Great Eastern:
To file your tax reliefs, you’d just have to use the numbers provided by your annual statement. Based on the example statement above, the only tricky bit is that the critical illness coverage can be claimed under the medical or life benefit. You could claim up to 100% of your premium under the life insurance category, or up to 60% under the medical benefit category:
| Category | Option 1 Filing critical illness under life insurance category | Option 2 Filing critical illness under medical insurance category | Limit |
|---|---|---|---|
| Life insurance | RM329.17 + RM113.76 | RM329.17 | RM3,000 (non-public servant) RM7,000 (public servant) |
| Education and medical insurance | RM1872.40 | RM1872.40 + (RM113.76 x 60%) | RM3,000 |
| Deferred annuity and PRS | - | - | RM3,000 |
| Total relief | RM2,315.33 | RM2,269.82 | - |
In this example, it makes more sense to claim the critical illness premiums under the life insurance category. But if you’ve exceeded the claim limit for this category, then you could claim the critical illness premiums under the medical insurance category. It’s all about trying to max out the claims available to you.
What else can you claim tax relief for?
We hope this has helped you make full use of your insurance tax reliefs.
But that’s not all you can claim for – for a full list of tax reliefs, as well as other information on filing your taxes, visit our personal income tax guide. It’s best to file your taxes by the deadline, otherwise you could incur a penalty or get fined.
Follow our income tax guide here which will be updated with everything you need for filing your 2023 income tax.
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